The income is reported on line 21, other income, on the Form 1040. You deduct the expenses only if you can itemize (i.e. your itemized deductions are over the standard deduction) as a miscellaneous deduction (not subject to the 2% limitation). However, you cannot net the income and expenses and report them on the return. The income and expenses must be reported separately.

Hence, if you do not itemize, it is possible to pay taxes on the gambling winnings. Also, if you put down alot of expenses, be prepared to document these expenses in an IRS audit.

In any case, gambling winnings and losses require a professional preparer in order to avoid many common errors that will get you if future hot water.

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